This article’s title is one of the sentences that always makes me shiver. Entrepreneurs investing all their time, energy and money in a business that has to work as a Franchise if they are going to create the pension value they need. It also makes me wonder if the time for Franchises is over. Not because they are a bad thing, but because all the viable, long term models have been created and exploited.
Let me clarify, I am not against the Franchise model – it is proven as a business model and statistics show that franchisees of proven franchise models are much more likely to be successful with a new venture than a stand-alone business startup. So, if you are considering buying into a Franchise, check out the The British Franchise Association (BFA) web-site and choose wisely.
Franchising Your Business?
You might get your franchise model started with a good brand, an excellent end-customer proposition, the means of transferring know-how to franchisees on a continuing basis and some brand awareness. However, the franchise will not be sustainable in the long term unless the value-add to the franchisees is considerable, sustained and hard for them to replicate alone.
For example, McDonalds not only spends a considerable amount on brand advertising, it also ensures the supply of products and materials to back-up campaigns and has a sustainable model in terms of supporting franchisees. Printing.com has an excellent printing service to support its franchisees as well as a sustained and continuous marketing model.
There are examples of franchises, which I will not name, which have a brand and some know-how. However, should a franchisee leave the family, the only thing preventing them from replicating an identical service is the contracts and agreements. Hardly a positive means to sustain the model.
My point is that it takes a certain sort of business model to be long term successful as a franchise. If you are starting a business that you plan to turn into a franchise, you might want to consider some of the following points – in addition to the advice on the BFA web-site:
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Ensure that the model works long term from the franchisee perspective
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Ensure that the model works from the supplier perspective
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Think about the end customer – will the value they receive be enhanced by your know-how and business model – in the long term?
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Continue to deliver support to franchisees – things that ensure they have a positive reason to stay in the family – support that ensures that there is a very low probability that they could deliver the same end customer value if they were not part of your franchise
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Test and measure the value that you provide to franchisees – often
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Take heed of any adverse criticism and modify the model to the benefit of all – continuously if that is what it takes
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Make the agreement a necessary tool, but ensure that the franchisees are not reading the small print to see how to work around the agreement if they leave your franchise family
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Consider adding a tiered structure to your franchise model – country, region or area based master franchisees – people who earn a living from adding value to the individual franchisees on a continuous basis – that way there are people in place to deliver value in return for the money that you require to be passed up the chain on a continuous basis
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Treat the BFA recommendations as the minimum standard for good practice – you will need to exceed them in several areas if your retirement is to be funded by your franchise model
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Use a commercial lawyer with considerable franchise experience – they will have seen lots of examples, good and bad, and will advise you on a lot more than the legal’s
A Caution
This short article is intended to be thought provoking – you will have to work things out for your own business – and you may disagree with some of my suggestions. That’s fine – as long as everybody concerned benefits from your franchise model – in the long term.
Comments?
I would welcome comments from franchise owners or franchisees – it would be interesting to find out how people are getting on in the current business climate.
This was a guest post by Paul Fileman of Results-Zone. Results-Zone bring extensive knowledge and experience gained in Blue Chip organisations to businesses like yours. They ensure that your business is fully exploiting a well thought through operating plan. They work alongside you and your team – as business results managers. They ensure that your team and your business are elevated to the results-zone. They bring you “hands-on” experience – similar to employing high quality management skills without the risk or costs in recruiting full time employees.
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